The courier, express, and postal industry is the largest segment of the transportation marketplace worldwide. This blog will provide a personal perspective on the challenges faced by firms in the industry as they serve an increasingly competitive market.

Tuesday, September 13, 2011

The Postal Service seeks to cuts its full time employees by 228,000 in the next two to three years. A review of attrition rates over the past three years indicates that layoffs are unavoidable. Even with early retirement incentives, layoffs will likely be between 120,000 and 130,000. Without these incentives they would be even higher.Attrition of Employees over 50
Attrition of Postal employees over 50 comes from retirement, death, and voluntary and involuntary separation from the Postal Service Early retirement incentives were offered to different groups of employees in 2009 and 2011. So the attrition rates below include the impact of these incentives.
Regarless of the reason an employee over 50 left the Postal Service, about 27% of the Postal Service employees over 50 in 2008 had left by 2011. Similar percentages for over 55, 60 and 65 are shown in the following table.

Comparison for Pay Period 18 for 2008 and 2011

Assuming that the Postal Service offers similar incentives to eligible employees, it should see a reduction in full time career employee among employees who are 50 or older today by around 94,000. The Postal Service should see total full time employee count by 100,000 if those under 50 leave Postal Service employment at historical levels. This quick analysis confirms Postal Service statements that it would have to lay off at least 120,000 employees in the next few years as it restructures its service.

The Importance of Early Retirement Incentives

By looking at one-year attrition rates, the importance of incentives becomes clear. Attrition rates of those over 50 rose between 2009 and 2010 reflecting the impact of the early retirement incentives for 150,000 employees that went into effect in the fall of 2009. As could be expected attrition rates fell in 2010-2011 as early retirement incentives pushed up retirement by a year for some employees.

Attrition rates for employees over 65 appears to suggest that the incentive may have had a real impact for these workers as it induced more retirements than would otherwise occur without having much impact on retirement decisions of employees who continued to work after the incentive expired.

Attrition rates for those between 50 and 60 actually dropped after an early retirement incentive was offered which suggests that the incentive may have only had the effect of convincing employees who were likely to leave for other employment to leave a year earlier and may not have had much of an impact on the number of Postal employees in that cohort over a longer period.

Comparison for Pay Period 18 for 2008 through 2011

If this estimate is correct, offering early retirement incentives could boost attrition rates for those over 50 by 3%. If these incentives were offered to all Postal Service employees over 50, the Postal Service would see its employee count cut by retirements increase by around 11,000 more than it would otherwise.

Statements Implying that Cuts in Postal Service Employment Can Occur Without Pain Are Wrong.

Yesterday, the Hill reported that Representative Darrell Issa stated on the Morning Joe on MSNBC,

"You can get the 200,000 or so excess workers off the payroll without having to use punitive measures."

In the same interview, Mr. Issa talked about forced retirements and implied that a forced retirement was not a punitive retirement. Even if you accepted that forced retirements did not violate age discrimination law and was not a punitive measure, forced retirement of Postal employees would still require a significant number of layoffs.

If one assumed that every employee over 65 could be forced to retire, then forced retirement would cut Postal employment by 17,000 more than normal attrition. If one assumed that every employee over 60 could be forced to retire than forced retirement would cut Postal employment by71,000 more than normal attrition. So forced requirements would still require layoffs of between 50,000 and 100,000 employees.

Cutting Postal Service Employment by 220,000 Requires Major Service Change

Cutting Postal Service employment by 220,000 requires that it cut its processing capacity, the number of delivery days and retail network significantly. These changes reduce service levels for both individual and commercial mailers retail customers is affected depends on the effectiveness of the Village Post Office concept and other efforts to switch retail services to franchisees and contractors.

The changes in service standards and delivery days represent a change in the Postal Service's universal service obligation. The changes in service standards represent a change in what the Postal Service promises its customers and do not reflect a specific obligation set in law. The change in delivery days represents a specific legal obligation that can be considered to be part of the Postal Service's universal service obligation.

The Postal Service's service standard obligation is similar to common carrier obligations that FedEx and United Parcel Service have to meet published delivery standards. Therefore this obligation can be changed at will by the carrier who is only obligated to provide the service that it promises. So technically the change in the service standard could be argued is not a change in the Postal Service's universal service obligation as it is a change in its common carrier obligation. Either way, the change in standard is a reduction in the Postal Service's commitment to its customers.

Congressman Issa in his interview stated that "Universal service is part of the [Postal Service's] mandate, and we think that's extremely important." As cutting employees would require changes in delivery days and service standard, Congressman Issa's understanding of the Postal Service's Universal Service Obligation does not appear to be fixed with the obligations that now exist.

Conclusion

Cutting 228,000 Postal Service full time jobs will eliminate jobs of people who wish to continue working. As forced retirements are most likely illegal, the Postal Service will have no choice but lay off 120,000 to 130,000 employees over the next few years.

In order to cut this number of employees, the Postal Service needs to change its way of doing business. Retail services will need to be increasingly performed by contractors and franchisees. Days of delivery would need to be reduced. Service standards would have to be relaxed. The latter two changes represent a major change in the Postal Service's commitment to its customers and a change in the understanding of the Postal Service's universal service and common carrier obligations.

25 comments:

Face the facts. USPS has $68,000 employees which it could lay off today, because they are not protected. But, they do not really want to layoff, they want to replace. They want to get rid of career employees, and replace them with casual employees. This is obvious, as they do not lay off those they could, and continue to advertise for new workers. We had to post an announcement seeking new PSE workers today. If they truly needed a layoff they wouldn't continue hiring, they would adjust current employees to fill vacancies rather than hiring.

Postal service would have made 1 billion in profits over the last 4 years if not for the pre-fundind payments. Mail volume is already rebounding in some districts, and parcel delivery is up 14 percent. Layoffs would not be necessary if the pre-funding was removed. Like the previous comment, there are over 80,000 te's that could be let go and many in management also if they really needed to get rid of people. Our little post office servicing a population of 3,000 makes a 300,000 dollar profit a month. I have a hard time believing the numbers the USPS puts out, especially when you can google USPS broke and closing, and they have been saying the same thing for years.

Issa is 58 this year.Why doesn't he retire?He has better retirement and medical benefits than postal employees do.He's the 2nd richest guy in congress but he's still sucking up those taxpayer benefits.

Anonymous is right, Alan, you do need a proofreader. I can read past a misspelled word or two, but I gave up on trying to make sense of the following sentence:

"These changes reduce service levels for both individual and commercial mailers retail customers is affected depends on the effectiveness of the Village Post Office concept and other efforts to switch retail services to franchisees and contractors."

However, given that you're not making money on this enterprise, I think you're doing pretty damned well. It's hard to copyedit your own material.

Sir, Why hasn't anyone questioned congress about where the money went when the Post Office was making a profit? Did they always come up short? I've been trying to find out where the 85% of the taxes I pay on my Socical Security money goes. I bet they both have met the same fate,in the frying pan with all the rest of the pork. Neither left or right,red or blue,just an old soldier watching our country fade away.

Retirement incentives would be the fastest, easiest, most compassionate way to downsize. BUT, to get the numbers they need to retire, the Postal Service will have to do better than the lame 15,000 they offered the clerks last year. And, they are going to have to offer some extra years of service, to make the monthly income higher.

Once again. In order to get the numbers the USPS wants from an early retirement offer they need to make it available to ALL USPS and USPIS employees. This will get a lot more to go. Do NOT limit the VERA to select groups this time. I am ready and willing to go. 33 years of service, 52 years old and CSRS. LET ME GO NOW!!!!!

As anonymous is saying. Laying off this many people would shut down the Postal Service. Did I say Service? To the point. I am x management that didnt want to be micro managed. Went back to craft in a level 22 Office. What does the Postmaster do? Watch T.V. in his office and walk around and P off employees 10 Hrs a day. How bout saving money by getting rid of Managent employees that contribute NOTHING!

Poeple, does anyone yet realize that when the PO gets rid of it's 200K plus craft employees, the PO intends to REPLACE them with PSE's, Non Traditional employees...the rolls will only shrink for a SHORT period of time until every one of the 200k plus employees they got off the rolls are replaced. Get rid of the higher paid and replace with the lower paid. But you'll never see them going after the REDUNTANT OVERRPAID LAYERS OF MANAGEMENT.. Easily save close to 1 million per processing facility multiplied by 500.. 9 maintenance managers on a shift that doesn't exist???? Gimme a break.

Why are there so many USPS District offices; and they report to multiple USPS Area Offices; and they report to the all-knowing powers in the USPS highrise Headquarter Office in Washington DC? How many executives and officers are in all of these offices? What is their annual pay? How much do they average each year in bonuses? THIS MAY BE THE BIGGEST WAY FOR THE USPS TO SAVE MONEY. If the USPS was serious that saving money was their only goal, then they would leave the high cost building in DC, sell it and receive top dollar then move into one of the vacant USPS buldings that they have closed down.

A few months ago the USPS eliminated 16% of it's officers. Many of them were able to find a different position within the postal service. Now the USPS wants to eliminate 60% of the blue collar postal workers. These employees will not have the opportunity to find other postal positions.

Will anyone ever see the obvious?? Why get rid of the people that do the work, instead of getting rid of the dead weight in all the offices. THE USPS IS SERIOUSLY TOP HEAVY!!

I believe the future of the post office might be over. Bringing PSE who are only making $14.60 an hour is scary. Would anyone care of losing their job making that amount as of making $22 to $25? There will be lots of stolen items and the people will lose their faith in the USPS. It already happened in our office with one PSE.

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Blog Author

Alan Robinson is the President of the Direct Communications Group and an associate of Analytic Business Services (AnaBus). He has over twenty years experience helping firms and government officials deal with the regulatory, policy, marketing, and management issues associated with changes in competition within transportation, parcel delivery and postal markets.
He can be reached at alan.robinson@directcomgroup.com